MAC: Mines and Communities

US: New Concerns over Mining Boom in Great Lakes region

Published by MAC on 2012-06-12
Source: Stateline, New York Times (2012-05-24)

Rio Tinto accused of "divide and conquer"

For a little over a decade, multinational mining companies have been scouring the Upper Peninsula of Michigan, looking for economic deposits of precious metals, uranium, and other minerals. 

Rio Tinto is the first company to receive permits to mine under Michigan's new hardrock mining law. 

The company has used standard "divide-and-conquer" tactics to pit the local community against itself, using the promise of hundreds of jobs, many local, as the carrot to get support for a nickel and copper mine.

Now that Rio Tinto is tunneling into the Eagle Mine ore body, it is working with Michigan governor Rick Snyder's office, as well as other state politicians, to change the manner in which mining projects are taxed. 

Rio Tinto, of course, wants a clearer, more industry-favorable tax structure, while locals want to maintain the same type of tax revenue promised them since Rio Tinto first submitted its mining proposal. 

Indeed, the political support Rio Tinto was able to generate for the project was largely conditioned upon the fact that local schools and municipalities would receive a significant amount of tax revenue from the project.

But this new division has caused some mine supporters in the area to (at least quietly) question Rio Tinto's modus operandi, leading to mild criticism of the company by local politicians. 

Meanwhile, Rio Tinto continues to explore elsewhere in the Upper Peninsula, while other companies - including Orvana Minerals and HudBay Minerals -  are also seeking permits to construct their own hardrock mines.

[Comment by Gabriel Caplett, 9 June 2012].

Mining Boom in Great Lakes States Prompts Environmental Concern

By Jim Malewitz, Staff Writer

Stateline (Pew Centre on the States)

24 May 2012

BIG BAY, Michigan - For thousands of years, the Salmon Trout River held fast to a deep secret, as its pristine waters flowed into Lake Superior. Below the river's headwaters, and hidden underneath 1,000 feet of sand, clay and rock, lie 4.1 million metric tons of ore speckled with valuable metals - primarily nickel and copper - a deposit that's valued at as much as $5 billion.

The treasure is no longer a secret here on the Yellow Dog Plains, a region of Michigan's Western Upper Peninsula marked by large swaths of untouched lands. The staccato of the hydraulic drill now overpowers the sound made by birds flying overhead, and trucks kick up dust where trees once stood.

"I see something new every time I come here," says Catherine Parker, noting a yellow electrical cord stretching across the ground, seemingly without end. The winding dirt road she drives is now bordered by a path of utility lines recently installed. It's an addition that Parker, who doesn't own a cell phone, says ruins the aesthetic.

Kennecott Minerals, a local subsidiary of the London-based mining giant, Rio Tinto, discovered the deposit about a decade ago. The company, which owns at least 400,000 of acres of mineral rights on the peninsula, is nearing completion of the nearly $500 million Eagle Mine, set to become the first primary nickel mine in the United States.

Parker frequently makes the hour drive northwest from her home in Marquette to monitor Kennecott's progress, reporting back to a coalition of local groups worried about the mine's impact on the river, surrounding plains and Eagle Rock, a spot that local Ojibwa people hold sacred. Parker is not the only one staying vigilant. "We can't sacrifice the UP for the Michigan economy, says Kristi Mills, director of Save the Wild UP, a nonprofit group that advocates for the Upper Peninsula's environment.

Michigan state regulators say that fears about the Eagle Mine are overblown, and that they give careful consideration to such projects, which take years to plan. "I think our state statute and rules are more than adequate to address [the environmental impact]," says Hal Fitch, the director of the state Department of Environmental Quality, who calls Michigan's mining law "one of the best in the nation."

Alongside local apprehension, there is considerable excitement among elected officials over the benefits the boom may bring. The return of mining is "huge in helping us provide services that we're mandated to provide," says Debbie Pellow, chair of the board of commissioners in Marquette County, where unemployment has fallen over the past two years but still hovers around the U.S. average of 8 percent.

That excitement isn't limited to the area around surrounding the Eagle Mine. To the west, in Gogebic County, which struggles under the weight of double digit unemployment, Michigan's state regulators have given tentative approval to a copper and silver mine planned by Toronto-based Orvana Minerals. And near the peninsula's southwest border with Wisconsin, two other Canadian companies have plans to mine a deposit of zinc, copper, gold and silver.

Surge in Interest

Mineral exploration has taken place here over the past few decades, but at a modest pace. Now steadily rising prices, driven, in nickel's case, by demand for clean technology manufacturing, have brought a surge in activity. Aided by new techniques, more companies are able to make money bringing out the deposits under the land.

"This is a boom, and this is as good as it's going to get," says Ted Bornhorst, a professor of economic and engineering geology at Michigan Tech University, and a consultant for mining companies.

But many locals, like Parker, are worried about long-term environmental impacts that the boom-and-bust industry might leave behind - especially in a region that prides itself on its natural beauty.

Particularly worrisome about today's mining, environmentalists say, is that much of it involves ore that produces sulfuric acid, which they fear will contaminate local water supplies, as has happened in cases throughout the country, particularly in western states, where most major sulfide mining takes place. "It's no mystery that sulfide mining pollutes rivers and streams," says Michelle Halley, an attorney for the National Wildlife Federation, who has been involved in legal challenges to mining permits in Michigan.

Recognizing the potential problem, Michigan and other states have crafted policies that deal specifically with sulfide mining. But as the boom has gathered momentum, those policies have received increased scrutiny from health and environmental advocates.

A legacy of mining

The discovery of rich mineral deposits on Michigan's Upper Peninsula is reviving an industry that began shaping communities more than 150 years ago, at a time when the land mass was completely desolate.

"Historically, this whole area is about mining, says Pellow, sitting behind her desk at a wastewater treatment plant in Ishpeming. "We wouldn't be here in the Upper Peninsula without iron ore mining."

Reminders of that history are hard to miss. On a two-hour trip between Marquette and Houghton, a driver will pass businesses named for the industry and signs advertising at least two mining museums. Even the newspapers in Marquette (The Mining Journal) and Houghton (The Mining Gazette) reflect that heritage.

But part of the legacy is the toxic waste that mining companies left behind. Houghton County's Torch Lake remains on the U.S. Environmental Protection Agency's superfund list, as officials finish cleaning up more than 70 years worth of dumped copper mining waste that once filled 20 percent of the lake with sediments poisonous to marine life.

"A lot of folks focus on those issues with mines," says Joe Maki, who coordinates mining regulation for the Michigan Department of Environmental Quality (DEQ). "But our grandfathers didn't know what we know now." State regulations have shifted - in Michigan and elsewhere - from a focus on cleaning up mines after the ore is gone to reducing environmental impacts while mining is underway.

Still, the metal mining industry remains one of the most toxic industries in the United States. In 2010, mines disposed of or released 41 percent of all chemicals tracked by the EPA's Toxic Release Inventory, far more than any other industry, according to the agency. And mining's share of toxic waste had increased over the previous year.

"Mining disrupts geological processes probably more than most anything mankind does," says Chuck Brumleve, a geologist and engineer, who has spent years in the mining industry. Now he works for the Keweenaw Bay Indian Community, studying the Eagle Mine's potential impacts.

Acid drainage

The large scale of the mines makes it difficult for companies, even using the best technology, to contain toxic materials, Brumleve says. Sulfide mines like the Eagle project are a particular concern to him because the mining will take place below the Salmon Trout River.

Brumleve and local environmentalists fear that water from the river will flow into voids left by the mined-out deposit, creating acid drainage. Kennecott and Michigan regulators have repeatedly said that won't happen. The company says it will treat any tainted water onsite, and will use acid-neutralizing limestone and other rock to fill the void as it mines the ore. "Safety is part of our culture," says Matt Johnson, a Kennecott spokesperson.

But Brumleve, along with Jack Parker, a mining consultant with more than 60 years of experience, worries that state regulators don't properly scrutinize mining applications, and, in the case of the Eagle project, have rubber-stamped a design that may be unsafe.

"I like mining," says Parker, who was originally hired by the National Wildlife Federation to examine the Eagle mine application, but has now worked for several years without pay. "And I do want my mine to be done in a responsible manner, which is not happening now."

Scrutinizing state policy

Michigan created a new mine regulation law, enacted in 2006, in anticipation of a sulfide mining boom. It was crafted by a group of regulators, environmentalists and industry officials who recognized that sulfide mining could conceivably harm the environment in more ways than iron mining operations did in the past. According to the law, "the economic benefits of nonferrous metallic mineral mining shall occur only under conditions that assure that the environment, natural resources, and public health and welfare are adequately protected."

Though many environmentalists describe the law as a positive step toward addressing sulfide mining's impacts, they say it still falls short. A report released this month by the National Wildlife Federation gave Michigan's mining law poor marks compared to laws in neighboring Minnesota and Wisconsin.

In Wisconsin and Minnesota, state officials conduct environmental impact assessments. In Michigan, the mining companies do it themselves. It's that issue that has sparked the biggest disagreements between the state and critics who don't trust mining company data. The critics say the cash-strapped DEQ lacks the expertise and the resources to check it. "We're always dependent on the company's data," says Brumleve. "It's just fraught with the potential for misuse."

Wisconsin as a model

Environmental groups have praised Wisconsin's permitting model, particularly its "prove it" provision, which requires companies seeking a permit to identify a similar mine in the United States that's operated for 10 years without polluting, and one that's been closed for 10 years without testing positive for additional pollution. "Over the years, Wisconsin has developed a very good policy," says Calvin DeWitt, a professor of environmental studies at the University of Wisconsin in Madison.

That law was nearly changed last session, as some legislators, eager to attract iron mining activity - particularly from Gogebic Taconite - pushed hard to loosen up on the state's strict rules, sparking one of the most heated debates of the session. The move was narrowly defeated in the Senate, and Gogebic Taconite announced it would not be setting up shop in Northern Wisconsin.

Despite Wisconsin's wealth of deposits, no other mining companies have pitched plans for the state that go beyond exploration. Bornhorst, the Michigan Tech professor, sees that as an economic loss, placing blame on the strict policy. "Nobody's going there, because there's no certainty in regulation," he says.

Bornhorst laments the protests of the environmentalists who are challenging mining projects in Michigan and elsewhere. "I think we as a society have lost touch with where things come from," he says. "We really need these metals. We realize that there's environmental cost to all those things."


As Mining Surges in Michigan's North, State Looks at Taking Control

by Jim Malewitz, Staff Writer

 Stateline (Pew Centre on the States)

25 May 2012

MARQUETTE, Michigan - It's a long drive from Marquette to Lansing: more than 400 miles in all, including a five-mile trip across the Straits of Mackinac, divider of Michigan's peninsulas. So it's easy to see why local officials here might not feel connected to lawmakers in the state capital.

"There's a huge disconnect between us and them," says Debbie Pellow, chair of Marquette County's board of commissioners, from her office at the local wastewater treatment plant. The distance, she says, "gives you a feeling of disenfranchisement."

Those are common feelings across Michigan's Upper Peninsula (UP), which has nearly one-third of the state's land mass but is down to just 3 percent of its population. Residents here (who call themselves Yoopers) have relatively little sway in the state legislature, with just a handful of representatives.

But now, thanks to a booming mineral market, the Upper Peninsula is back on the state's political agenda. Mining companies' growing interest in the Upper Peninsula's mineral wealth - mostly nickel and copper - has state policy makers pondering how best to capitalize. First, it was through a controversial zoning law. Now, lawmakers are discussing an overhaul of the tax code as it relates to minerals.

"We've always done mining, and they left us alone," says Pellow, of the iron mines that put her community on the map. "And now, all of a sudden this new type of mining comes in, and there's billions of dollars involved....It feels like Lansing is saying ‘ta-dah,' there's some money up there."

Eroding Local Control

Last session, the Michigan Legislature passed a bill preventing local governments from zoning out unwanted mining activity. It was a state-local gravel mining dispute that brought up the issue. But the bill's broad language seems to give companies the right to mine any resource wherever they see fit. "An ordinance," the law now states, "shall not prevent the extraction, by mining, of valuable natural resources from any property unless very serious consequences would result from the extraction of those natural resources."

The bill, which moved to enactment in just two weeks and received little discussion, included an emergency provision allowing it to take immediate effect upon passage, a practice that some followers of the Michigan legislature decry as unconstitutional. Backers of the law, including two Upper Peninsula lawmakers who proposed it, say it would protect companies against municipalities that might shun large-scale development and the revenue that comes with it, largely because of minor local complaints - such as too much noise.

When a local government zones out businesses not tied to the land, it's less of a problem, says Representative Matt Huuki, one of the UP legislators who pushed the bill, because those businesses can move. That's not the case with mining. "Minerals only happen to be where God placed them," he says. "It all comes down to giving investors security."

But many here, even some who welcome the mining boom, wonder whether the measure goes too far in eroding local authority.

Richard Norton, an urban and regional planning expert at the University of Michigan, says it's common for states to carve out exemptions to local zoning ordinances, as municipalities can overzealously exclude development before fully researching its impact. But Norton says Michigan's latest exemption is "a sledgehammer solution to a problem, and it probably goes too far."

Severance Tax

The legislature isn't finished with mining, however. It is looking to create a new taxation system, on the grounds that the current setup is outmoded and bad for investors. The governor and several legislators are pitching a flat-rate severance tax on minerals that would replace sales taxes, corporate income taxes and the local ad valorem taxes applied to property.

At least 38 states place a severance tax on certain natural resources, according to a study prepared last year for the Center for Michigan, a nonpartisan think tank. Taxing commodities such as oil, natural gas or minerals as they are "severed" from the ground is the most common way states generate revenue from such resources. It's meant to capture the current value of the resources, unlike taxes tied to property value, which may decline as companies use up resources in the ground.

In 2010, Michigan collected more than $57 million in severance taxes on oil, natural gas, timber and iron ore. But most mining operations have long been exempted from those fees. The state wants to change that for the $2 billion industry that's looking to grow.

Perhaps surprisingly, Michigan mining companies are welcoming the prospect of a severance tax. They see it as replacing taxation based upon estimated, and sometimes disputed, value. "The problem with existing taxes," says Matt Johnson, a spokesman for Kennecott Minerals, which is nearing completion of a nickel-copper mine in Marquette, "is they aren't based upon profitability."

Under a severance tax, mining companies would have fewer costs upfront. They would pay more once the minerals are out of the ground and the mine is earning revenue. "It brings fairness and stability to investors," says Representative Huuki, who is working on a severance tax bill.

Fueling a divide

But the proposed changes would not only alter the form of mining taxation - they would move most of it to the state level. The prospect of ceding control to Lansing has sparked anger among elected officials in mining communities, who worry that their ability to finance government services would suffer.

"The legislature would basically be in control of any changes by a majority vote and signature by the governor, versus leaving the tax as ad valorem, where it is collected and distributed to the local communities and school districts," says Mike Quayle, a Marquette County commissioner. "The folks downstate are looking at it as another revenue source to help with their woes, and they won't give it up."

Addressing the concerns

The latest iteration of Governor Rick Snyder's tax proposal shows he's seeking to assuage those concerns. Under that plan, the state would impose a mineral severance tax of 3 percent, and 45 percent of that would benefit impacted communities. The remaining tax collections would go to a statewide rural development fund, which the governor's office says would support long-term investments in rural Michigan. That would include mining communities, which have historically suffered after their minerals are gone.

"This proposal was really crafted with local communities in mind," says Sara Wurfel, Snyder's press secretary. "The bottom line is to move away from the booms and busts of the past." The development fund's projects might relate to broadband, energy, rail, or job training, she says.

"What we're really trying to leave behind when the mines close is development," says Keith Creagh, director of the Michigan Department of Agriculture and Development.

The Snyder administration insists that under the governor's plan, communities like Marquette would take in at least as much in taxes as under the old system. And localities would be charged with collecting the taxes, reducing the risk that Lansing would keep more than its share.

That isn't good enough for Quayle. "They dressed up this proposed bill rather nicely to try to calm any local opposition," he admits, but he says the 3 percent rate may not provide as much money as expected. At that point, he fears, Lansing will change the rules on the Yoopers yet again.


A Mining Rush in the Upper Peninsula

By Emily Lambert

New York Times

24 May 2012

IRONWOOD, Mich. On the far northern reaches of the Upper Peninsula of Michigan, James Jacques drove on a rutted logging road to an old mining shaft surrounded by a chain-link fence.

Dug in the 1950s, the shaft was briefly active when copper-bearing rocks were discovered there. Sixty years later, Mr. Jacques is tasked with finishing the job by digging a new mine 900 feet down.

"From my perspective, its a once in a lifetime opportunity," said Mr. Jacques, who works for a subsidiary of Orvana Minerals, a Canadian-based mining company.

This remote area of Michigan, long ago left for dead, is rediscovering its mining roots raising hopes here and across much of the Lake Superior region that a mining revival is in the making. With copper and other metals trading on commodities markets at consistently high prices, companies are digging into long-neglected deposits for metals that could be worth billions of dollars.

Rio Tinto, the worlds largest mining company after BHP Billiton, is working on a $469 million mine that will produce nickel and copper. Hudbay Minerals, a public mining company, is leading an expected $225 million project to mine precious and heavy metals, including gold, silver, zinc and copper. Orvana has received approval to mine chalcocite, a mineral that is primarily copper, in a project here that the company says will create $2 billion in economic activity over 20 years.

Smaller exploration firms are joining the rush too, searching for new ore deposits and studying known ones. One of them, Highland Resources of Vancouver, British Columbia, is spending $11.5 million to explore and develop potential mines, including two copper mines near Calumet, Mich.

The price of copper has held up even in the face of a worldwide economic downturn, said Dr. Ross R. Grunwald, vice president for exploration for Highland. Regardless of recent dips in the market, Dr. Grunwald predicted worldwide demand and a looming shortage will send prices even higher.

Analysts say prices for metals like copper and zinc, as well as for iron ore, are likely to remain strong enough to warrant the flurry of projects. The JPMorgan metals and mining analyst Michael F. Gambardella said that even if some prices were to fall, factors like the low cost of making steel in the Midwest make mining in the region attractive for quite some time.

There are worries about the environmental fallout of the new mining, and about how sustainable a mining-led recovery might be. But supporters of the new ventures want this to be a welcome homecoming for an industry that shaped the region. From the 1840s to the 1880s, the Upper Peninsula turned out most of the countrys copper and, by 1880, a large chunk of its iron ore. Newspapers, cities, roads and parks still bear the names of miners, minerals, mining companies and other things related to mining.

Evidence of the new mining activity is already visible. East of here, in Marquette County, towns like Big Bay have seen an increase in construction and temporary workers renting hotel rooms and homes. In Marquette the largest city in the Upper Peninsula, with 21,000 residents the Border Grill restaurant owner Dan Torres estimates that the Rio Tinto mine is increasing monthly sales by $500 to $1,000. Rio Tinto will make its first tax payment this July and is expected to pay $4.3 million to local authorities.

The enthusiasm for mines to reopen is especially palpable here in Ironwood, where dozens of iron ore mines once employed thousands of people. Most everyone in town had fathers or grandfathers who worked in the mines, and some residents worked there themselves. Many recall that the downtown used to be so full on Friday nights that the police would be needed to control traffic.

A mural in the municipal building shows a panoramic view of the once-bustling city. A small, dusty museum in an old train depot is full of miners clothes, tools and discoveries, including a block of iron ore.

But by the time the last of the mining companies departed in the 1960s, Ironwood had lost nearly half its residents and the bulk of its economic foundation. The population now stands at just under 5,400, and unemployment in Gogebic County, which includes Ironwood, is 10.7 percent.

While some people have steady jobs in logging, manufacturing or at nursing homes, many residents patch together seasonal jobs by working at ski hills and painting houses. Many men have left for North or South Dakota to work at oil fields, leaving families behind.

The hope is that mining will bring some of those people back. Signs in some windows and on the highway into town proclaim support for the new mining wave. Orvana has yet to put a shovel in the ground, but it has received hundreds of rsums, many dropped off by people who had left town and were back visiting family.

Marquette County, in addition to the Rio Tinto mine, is buoyed by Northern Michigan University and two surviving iron ore mines, among other things, so it does not share the unemployment problems of Gogebic County. But other erstwhile mining counties are in even worse shape. In April, the unemployment rate in Ontonagon County was 13.9 percent, in Keweenaw 12.9 percent and in Baraga 16.3 percent. By comparison, the statewide rate was 8.3 percent.

We desperately need good-paying jobs for this area, said Keith Johnson, director for the western Upper Peninsula region at the Michigan Works agency. It might be just 10 or 15 years, but its going to be 10 or 15 years that we can truly enjoy.

In the woods outside of Marquette, Rio Tinto last fall started blasting to reach an ore body that was identified in 2002 and is as much as 1,000 feet below the surface.

The mines footprint is a 130-acre, secure construction zone. Rio Tinto cleared all the trees except on a rocky outcrop sacred to a local Native American tribe, and has put up facilities including a water treatment plant. Next to the outcrop is a long, dark tunnel wide enough to accommodate a truck.

On a brisk day in April, red-clad miners drove a piece of heavy machinery called a rock bolter to the end of the tunnel and used automatic arms to pound in bolts and affix industrial-strength netting to the walls and ceiling to prevent rockfalls.

Rio Tinto plans to start pulling ore out in 2013. Adam Burley, president of Rio Tintos Kennecott Eagle Minerals subsidiary, was transferred from London to oversee the operation. He said the company hopes to develop more mines nearby and has a portfolio of advanced, encouraging targets.

Some 150 miles south, Hudbay Minerals, working with the public exploration company Aquila Resources, expects to apply this year for permits for a mine that the companies estimate would create hundreds of jobs and generate $27 million in taxes.

The economic risk of the new efforts is that mining could be a temporary fix. Orvana, for example, plans to run its mine here in Ironwood for 13 years; it would need an additional seven years for construction and reclamation. After that, it is anyones guess.

"I think people in fact have significantly exaggerated expectations in terms of what mining is likely to do for the local economy!, said Thomas M. Power, a professor emeritus of economics at the University of Montana, who spent summers as child in this region. He warned that mining towns never succeed in the long term and would be better off diversifying in other ways.

There are environmental risks as well. Some are concerned the mining could hurt waterways and especially Lake Superior, the largest freshwater lake in the world by surface area. A collection of environmental groups said that state and provincial laws, and enforcement, are inconsistent and inadequate.

In Michigan, mining companies submit internal environmental assessments to the state. But Michigan does not require a more stringent environmental impact statement that would involve third parties. And so far federal oversight has been largely delegated to the state.

The Keweenaw Bay Indian Community, concerned about the pollution, has asked the United Nations to investigate. The United States in 2010 endorsed the United Nations Declaration on the Rights of Indigenous Peoples, which recognizes the rights of natives to protect their lands and resources.

No entity is really looking at all of these impacts at any one mine, much less all the impacts across the whole basin and really thinking about what would this mean for the region and Lake Superior, the headwaters of the Great Lakes, said Michelle Halley, a lawyer for the National Wildlife Federation, which is one of several parties suing to stop the Rio Tinto mine. The group has made suggestions on how Orvana could make its plans more environmentally friendly.

Just over the state line in Wisconsin, Gogebic Taconite dropped a proposed $1.5 billion, open-pit iron ore project after lawmakers failed to adopt a bill that critics say would have relaxed environmental regulations and limited public input in the permitting process.

Gogebic Taconite is now drilling for iron in Michigan.

"Its great that it'll cause jobs", said David Hill, 29, an Ironwood resident who is out of work. "Im just hoping theyll do it safely. Thats No. 1. Sometimes its not about money, but what are you doing to the land that you live on."

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